Smarter hotel payments pave the way to higher margins for OTAs

On the face of it, paying a hotel should be one of the very simplest tasks that an online travel agent (OTA) needs to deal with. It is, after all, a fairly essential part of the booking process. But, all too often, issues arise during the payment process that end up costing an OTA more time and money than it should.

Sometimes those problems originate from traditional payment methods like bank transfers and corporate cards. Heavy FOREX fees, the cost of making international transfers and the cost of establishing a credit line can all drive up the price of paying a hotelier. And that’s before we take into account considerations like fraud, juggling multiple currencies or even the additional workload created by manual reconciliation.

While virtual cards solve many of those issues – cutting FOREX, countering fraud and helping OTAs keep control of reconciliation – they can also generate a whole new range of problems. Partly, at least, that’s because many virtual card platforms were designed with payments to airlines in mind; because airline tickets need to be paid for at the time of purchase, the process is linear and relatively easy for an OTA to manage.

The same can’t always be said of hotel bookings, where the picture is more complex. Pre-, post- and part-payment bookings all present different hurdles for an OTA to overcome, revolving mainly around when payment is made. Getting that wrong not only creates additional work for an OTA, it can also lead to complications in the booking process and ultimately cost them money.

At the same time, virtual cards can offer OTAs a wide range of benefits, with everything from additional revenue streams to better cash flow planning on offer. So how do agents reap those rewards without falling prey to some of the complications involved in using virtual cards?

To answer that, let’s look at each of those categories, the issues they present, and some potential solutions.

1. Pre-payment:

Pre-payment, while the simplest of the three scenarios, still has the potential to cause trouble for unwary OTAs. Because many virtual card schemes provide single-use credit cards as a default, problems can arise when hotels choose to pre-authorise that card. Many hotels will perform an authentication check on a virtual card to verify its validity before billing the full pre-payment amount.

Even though the value of that pre-authorisation can be as little as one Euro (or, even, nothing), because the virtual card is single use only, any subsequent attempt to bill that card for the full payment amount will fail. Extrapolate that to a few hundred or even thousand bookings, and the scale of the issue grows immeasurably.

Ixaris Solution: our Hotel Settlement payment service offers multiple-use cards and custom configurations for how and when cards are deleted.

2. Post-payment:

Post-payment presents a different challenge. Although the money for a booking doesn’t need to be taken until a stay is complete, OTAs can choose to load a virtual card in advance and leave the funds in place until needed. Doing so, however, can be detrimental to an agent’s cashflow. One alternative is to load the virtual card nearer to the time of the customer’s visit – but this requires a member of staff to manually load that card, something that can quickly become a headache if repeated for every postpaid booking.

Ixaris Solution: our Hotel Settlement payment service allows for the automated loading of virtual card funds. Select when funds should hit the virtual card associated with a post-pay booking in order to maximise cashflow and eliminate manual intervention.

3. Part-payment:

Elements of both pre- and post-payment challenges make their way into this third category. Like pre-payment, OTAs need to be sure that they can use a virtual card for multiple transactions to hoteliers. And, as with post-payment, they also need to control when funds are loaded in order to protect cashflow. Additionally though, OTAs also need to dictate when a virtual card is closed in this scenario. While single-use virtual cards are closed off as soon as they are used, multiple-use cards need a specific instruction to do so. All of this amounts to a potentially huge amount of manual work if not successfully automated.

Ixaris Solution: As with pre- and post-payment, OTAs need a virtual card solution that allows for multiple-use cards and automated control of fund loading. But, in this instance, they also need to be able to govern the point in time at which a multi-use virtual card is closed. Otherwise this equates to a huge labour burden if managed manually. Ixaris’ solution has been developed to offer OTA’s the ability to select a date on which the card will automatically close and return any unspent funds to their account.

Used correctly, virtual card schemes can deliver huge benefits to OTAs when they are dealing with hotels. But a “one-size-fits-all” approach to virtual cards is too simplistic to successfully manage the many complexities inherent in the hotel booking process. Instead, OTAs should look carefully at some of the tactics above and how they could be employed to help them capitalise on an increasingly lucrative hotel opportunity.

If you are interested in having a discussion or would like further details about our dedicated Hotel Settlement Solution then please contact us at dropusaline@ixaris.com